Event: on April 29, the Political Bureau of the CPC Central Committee held a meeting. The meeting stressed: "we should effectively control key risks, hold the bottom line of no systemic risks, adhere to the positioning that houses are used for living, not for speculation, support all localities to improve real estate policies, support rigid and improved housing demand, optimize the supervision of commercial housing pre-sale funds, and promote the steady and healthy development of the real estate market."
The positioning of non speculation in housing and housing continues, clearly supports the improved housing needs of all localities, and the purchase and loan restriction policies in more cities can be relaxed. The Politburo meeting focused more on real estate, mainly including three points: no speculation in real estate, supporting rigid demand and improving demand due to urban policies, and optimizing the supervision system of pre-sale funds. Recently, the central government frequently mentioned the housing demand, and the Politburo meeting in December 2021 proposed to "support the commercial housing market to better meet the reasonable housing demand of buyers"; On March 5, the government work report put "ensuring people's housing needs" in the first place; On April 18, the central bank and the State Administration of foreign exchange proposed to "implement differentiated housing credit policies according to urban policies, reasonably determine the minimum down payment ratio and minimum loan interest rate requirements of commercial individual housing loans within the jurisdiction, so as to better meet the reasonable housing needs of home buyers". The meeting clearly defined reasonable housing demand as rigid and improved housing demand, which means that the follow-up policy support for second set of housing will be strengthened. Since this year, many cities across the country have relaxed their housing demand side policies, mainly focusing on the third and fourth tier cities in the early stage. The main relaxation policies include: reducing the down payment ratio, reducing the housing loan interest rate, relaxing the provident fund loan policy, house purchase subsidies, etc. since March, some cities have also loosened their "four limits" policies, including Zhengzhou, Harbin, Quzhou, Qinhuangdao, Suzhou, Nanjing Liuhe, Shanghai Lingang Holdings Co.Ltd(600848) etc. After the historical resumption, it is found that after the sharp decline in sales and even the decline in house prices, the key to reversing the expectation of home buyers is the need for the policy of purchase and loan restriction level in core cities, especially the policy of loan restriction level. It is expected that the relaxation pace and intensity of purchase and loan restriction policies in more cities will be accelerated.
At present, the national inventory is at the ninth percentile of the historical high, and at least more than half of the second tier cities have the basis for relaxing purchase and loan restrictions. As of February 2022, the inventory of new commercial housing in 70 cities was 490 million m3, accounting for 90.9% of the highest point in recent ten years (January 2015). The inventory of housing in first tier / second tier / third tier cities was 36 / 297 / 162 million m3 respectively, equivalent to 81% / 82.7% / 110.7% of the historical peak. Under the background of the continuous downturn in sales and the increasing decontamination cycle, the current inventory can support the relaxation of demand side policies in many cities. Considering the demographic and economic conditions, we believe that at least half of the second tier cities have the basis to relax purchase and loan restrictions. For details, please refer to our previously released in-depth report on the industry: Series II of major changes in real estate: the path of historical recovery, where is the trend of policy relaxation
The pre-sale fund supervision policy will be optimized, and the credit quality real estate enterprises will take the lead in benefiting. For the first time, this meeting needs to optimize the supervision of commercial housing pre-sale funds. In fact, since this year, Chengdu, Beijing, Yantai, Shijiazhuang, Dongguan and other places have optimized the regulatory policies of pre-sale funds to varying degrees. The main measures are to slightly reduce the retention proportion of regulatory funds for developers with good credit record and high credit rating, or allow the replacement of the regulatory limit of pre-sale funds by issuing cash guarantee. It is expected that the central enterprises will take the lead in relaxing the supervision of the amount of high-quality credit insurance accounts, especially for the small amount of credit insurance accounts that benefit the people's livelihood.
Investment suggestion: maintain the "overweight" rating of the real estate development sector. We believe that the core of the enterprise's demand side financing policy is to relax the demand side financing policy and tighten the demand side financing policy. This year is a large-scale policy easing cycle, which is a beta market. Real estate enterprises with good credit qualification, sufficient liquidity, sufficient soil reserves and high quality are the main choice. It is suggested to pay attention to: A shares Poly Developments And Holdings Group Co.Ltd(600048) , Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Gemdale Corporation(600383) , China Vanke Co.Ltd(000002) , Huafa Industrial Co.Ltd.Zhuhai(600325) ; H shares green city China, China Resources Land, China overseas development, Longhu group, China Jinmao, Xuhui holding group, China Overseas Hongyang. Property management: China Resources Vientiane, green city service, poly property, Yongsheng life service, country garden service, Jinke service, China Merchants Property Operation & Service Co.Ltd(001914) .
Risk warning: the epidemic situation repeatedly exceeded expectations; The tightening of epidemic prevention policies exceeded expectations; The downward trend of fundamentals exceeded expectations; The policy relaxation was less than expected.
